High Yield Savings Accounts Compared

Where should you stash your money while you’re saving up an emergency fund, new wheels, or a down payment on a home? Today, online savings accounts provide returns with interest rates far better than local banks. Plus, unlike other investments, these high yield savings accounts are FDIC-insured up to $250,000. In this review, I take a look at the leading online high yield savings accounts in the U.S. to help you decide where to put your pennies.

Ally Bank (2.00%, rate updated 6/19/09) – The newest player in the high yield savings account, Ally Bank (formerly GMAC) offers a high rate with no fees, no minimum opening deposit, and no minimum balance.
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WTDirect Savings Account (1.76%) – WTDirect is the best choice online savings account for customers who want dedicated personal service from real people.
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HSBC Direct (1.55%) – HSBC offers one of the best rates available, provides free worldwide ATM access to your account, and is affiliated with the international brick-and-mortar HSBC bank. No other HSBC accounts are required to open an HSBC high yield savings account.
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E*Trade Max Rate (0.95%) - E*Trade’s Max Rate Complete Savings Account currently provides a 0.95% APY with no fees and no minimums. E*Trade also offers an optional free checking option paying a competitive interest rate on balances over $5,000.
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ING Direct (1.50%) – ING started the high yield savings trend before most people even thought of online banking. ING also offers perks, like an optional free interest-bearing checking account, contests for auto-depositing savers, and a partnership with ShareBuilder offering saving and investing in one account.
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Ally Bank: 2.00% APY

New on the high yield savings scene in June 2009, Ally Bank (formerly GMAC) has the no-minimum rate to beat: 2.00% (rate updated 6/19/09).

Ally Bank Pros

• High interest rate
• Daily compounding for great interest returns
• No minimum balances or monthly fees

Ally Bank Cons

• Six withdrawal per statement cycle (month) limit

Learn more about Ally Bank or open an account now »

WTDirect Savings Bank: 1.76% APY

A division of Wilmington Trust, WTDirect offers discriminating savers personal service from real people and a competitive annual yield.

WTDirect Pros

• Highly rated personal customer service
• Leading interest rate
• Secure. Wilmington Trust is a part of a family of companies with a solid 105-year history.

WTDirect Cons

• Minimum balance required to receive best rate

Learn more about WTDirect or open an account now »

HSBC Direct: 1.55% APY

Savers now earn 1.55%. There is no minimum to open an HSBC account and you will have ATM access to your cash through HSBC’s extensive global network.

HSBC Direct Pros

• High interest rate
• Worldwide ATM Access
• $1 to open an account
• Optional bill paying account

HSBC Direct Cons

• No checking account option
• Fee for ATM withdrawls

Learn more about HSBC Direct or open an account now »

E*Trade Max Rate: 0.95% APY

E*Trade provides the benefit of getting a high yield no minimum savings account and interest-bearing checking account from a company that also provides top-rated online brokerage services. E*Trade’s checking and savings products were given high mark’s by Money magazine in 2008.

E*Trade Pros

• Wide range of linked products, including CDs and stock trading
• Optional free interest-bearing checking account
• Free ATM use and fee reimbursement

E*Trade Cons

• Founded in the late 1990’s, E*Trade is younger than competing banks

Learn more about E*Trade or open an account now »

ING Direct: 1.50% APY

ING offers 1.50% on savings balances and the chance to earn interest with their free checking option, Electric Orange. ING features a user-friendly website and the most refined security and customer service.

ING Direct Pros

• ING was the first truly online bank
• Leader in security and customer service
• Optional free high interest checking account
• No minimum deposit or fees

ING Direct Cons

• Strict security makes it tricky to add ING to online budgeting tools like Mint.com and Mvelopes

Learn more about ING Direct or open an account now »

Interest Rates

These high yield savings banks frequently change their interest rates to keep in line with the federal reserve benchmark rate; they may also change their rates for competitive reasons. When you open a high yeild savings account, your interest rate is variable, not fixed, meaning it will go up and down with the market. After two years of tracking these accounts, it’s important to note that the banks with the highest rates today may not be tops tomorrow. That said; HSBC Direct has consistently had the highest or second-highest interest rate that does not require a minimum balance.

While a leading interest rate is important, don’t forget to consider other factors. For example, if you want just a savings account to stash some money and forget it, HSBC is a great options. If you may want to access CDs, free online checking, stock trading, and home loans, ING and E*Trade are better fits.

Editor’s note: Given today’s sour economy, even the best interest rates listed here are a long ways from what online savings accounts once offered. Although these accounts still provide the best risk-free way to save for a rainy day; if you’re looking for a better return, consider investing in social lending. Compare social lending networks or learn more about the top two: LendingClub and Pertuity Direct.

ATM Access

ATM use is a major feature offered automatically by HSBC, and E*Trade but not ING (unless you enroll in ING’s free checking option). While making withdrawals from ING, for example, is free and easy, it still takes a few banking days to reach your checking account. Especially for those using a high yield savings account as an emergency fund, ATM access to cash is a major perk. Of course, not having ATM access is a plus if you tend to tap savings too frequently.

Checking Accounts

E*Trade offers an optional high yield checking account, and ING offers the great, free Electric Orange checking account that comes with a free MasterCard Debit Card.

Both give you free bill payer, and E*Trade even gives you free check writing. (With ING, you can send paper checks in the mail, but don’t get a checkbook). How can these banks provide free, interest-bearing checking? There are no branches, and no paper statements, saving the banks big bucks that they are able to funnel back to customers.

Other Considerations

Aside from a good rate and easy access to your cash, what else should matter in a high yield savings account? Personally, I cherish simplicity. The easier an account is to open, manage, and link, the happier I will be. Forrester Research gave ING Direct a lot of points in this category back in 06—from their account demo to their simple automatic savings plans—but I think competitors have caught up with ING, who has been around the longest.

I hope you find this comparison useful in choosing a high yeild savings account. I am keeping this review page up to date with the latest rates and account features as I get them, but please remember to double check each bank’s terms before you apply. In sum, if it is purely a high interest rate you are after, Ally Bank currently offers a great no minimum balance rate of 2.00%. For personal service, choose WTDirect.

Happy saving! Go back to the top of this review, or open an account now:

• WTDirect Savings Account
• Ally Bank
• HSBC Direct
• E*Trade Max Rate
• ING Direct